Microsoft misses slightly on revenue, but its all-important cloud business is stronger than ever

Microsoft CEO Satya Nadella addresses the media during an event in New Delhi September 30, 2014.
REUTERS/Adnan Abidi

Microsoft reported earnings today, beating Wall Street estimates on EPS, but coming in with a slight miss on revenue. Still, Microsoft was able to show strong growth in its crucial Office and Azure cloud computing segments.

Revenue from its Productivity and Business Processes unit, which includes the fast-growing Office 365 cloud productivity suite, was up 22% from the same period in 2016, to $8 billion. There are now 26.2 million consumers subscribed to Office 365.

Plus, this was the first full quarter since Microsoft's $26.2 billion LinkedIn acquisition closed in December 2016, giving us our first glimpse into how they're playing together. LinkedIn operates under that same Productivity and Business Process unit, and contributed $975 million in revenue but an overall $386 million loss.

The Intelligent Cloud unit, which encompasses the Microsoft Azure cloud and Windows Server businesses, was up 11% over the same period in 2016 to $6.8 billion. Azure itself saw revenue grow 93% from the same period last year, but Microsoft doesn't disclose specific financials for that service.

More Personal Computing, which includes Windows, was down 7% year-over-year — a dip that Microsoft blames on its struggling phone business. The business of selling Windows to PC manufacturers was up 5%, and other Windows sales and services were up 6%. Surface revenue was down 26% year-over-year, while gaming revenue is up 4%.